Talk:Mutual credit

Proposed Merge

I don't think this page should be merged into mutualism (economic theory). There is a connection between mutualism and mutual credit, but I don't think that the connection is strong enough to warrant a merge. If mutual credit were deemed insignificant enough that it did not deserve its own page, I think it would be better to merge it into alternative currency, as both of those pages are smaller and they seem to have more in common. Personally, I would oppose merging it into anything; I think this page on mutual credit should be expanded and kept in its own right. This is especially true if we want to have a balanced geographic coverage. Some points to think about:

• Mutual credit can and is used by people who do not necessarily adhere to the philosophy of mutualism. Much of the stuff I've read about mutual credit does not explicitly mention the philosophy of mutualism.
• Mutualism is much broader than the idea of mutual credit, and mutualists advocate all sorts of reforms in society, ones that go much deeper than the implementation of a mutual credit system alone.

Cazort (talk) 01:29, 16 December 2007 (UTC)

Proposed merge

This page should not be merged to any other page. Mutual Credit is a concept that warrants its own page, it should not be burried somewhere else. This page should be expanded with more detailed explanations of what mutual credit is, how it works, and historical examples. Solviva (talk) 02:11, 21 November 2009 (UTC)

I agree 100%. Cazort (talk) 18:35, 21 November 2009 (UTC)

Major downside?

I dont agree that "running up a negative balance and then leaving" is a "major downside" of mutual credit, nor is it common to other types of credit. It could be said to be a typical flaw in the way the organizers implement their particular system, but it is not an inherent flaw in the operation of mutual credit itself. Some mutual credit systems are vulnerable in this way, some are not. You cannot run up a credit card and then simply close the account, you must pay the balance before being allowed to close. You cannot take out a bank load and then simply dissappear, you remain legally liable for the debt.

The difference is this: Conventional bank credit system always include the pay-before-closing clause, whereas many community currency systems have left it out of their member contract, or have no member contract at all, leaving themselves no legal recourse and thus inviting abusers to exploit the system by running up negative balances and then defaulting.

While many community currency systems have fallen victim to this problem, it is easily corrected by including a clause in the membership agreement that members cannot close accounts until first paying their outstanding debts, which is the same rule as applies to any type of credit that i know of, and is perfectly fair and equitable.

It may be true that all types of credit are vulnerable to exploitation by defaulters. But there is a sharp difference between when it's committed illegally with criminal intent in defiance of signed contracts, and when it is allowed to happen legally because the implementers naively left themselves vulnerable with no recourse.

Whether or not a system includes a pay-before-closing clause, does not determine whether a system fits the definition of mutual credit, therefore it is not inherent flaw of mutual credit. It would be better expressed to be "a typical mistake in some implementations of mutual credit."

This needs to be clarified in the article. The entire article needs to be expanded to cover issues such as this. Opinions, anyone?Solviva (talk) 03:48, 21 November 2009 (UTC)

I don't agree with your assertion that this problem is "easily corrected by a clause in the member contract". As someone who has run my own business as well as worked for another business that both required collection work, collecting on debt is complex, time-consuming, sometimes legally problematic, and often straight-up impossible. Also, the problem is more subtle than you might think: mutual credit, as part of the complementary currency movement, is a move away from the global economic system. One thing that the global economic system is good at is enforcing and collecting on debts, and one way they do this is by not including clauses on enforcement of debt. I think there is a strong argument that little is lost by doing this because the collection of debt is so difficult and resource-consuming. One way of looking at the problem of "freeloaders" is as a breakdown in trust--something which is already in scarce supply in our society. Debt collection is associated with a breakdown of trust, not a buildup of trust, so it makes sense that they would not encourage this viewpoint.

I would not support changing of the wording to "atypical mistake" in the absence of reliable sources firmly establishing that this decision is a "mistake". And I'm pretty sure that you're not going to find this. What you'll find is that different authors (and sometimes even one author) will have different recommendations about how to structure or organize a mutual credit system, based on an underlying set of goals and values, and the needs of the particular community it is intended for. If you have a good source backing up your argument, I'd like to see it, because I haven't read a single compelling argument backing up what you are saying yet! Cazort (talk) 18:35, 21 November 2009 (UTC)

The only book (more citations needed) cited as a reference for this article, Greco's, firmly aserts that a member contract is necessary and should include an agreement that "any debt balance incurred represents a loan from the community, which the member is obligated to repay." Page 198, Item 2. Its a common theme throughout the book.

Its true that recomendations differ on how to implement, but that is more properly included in the community currency article. Here we should elaborate on the principle of mutual credit. Lets look for a better definition. I already know what mutual credit is, but the definition in the article still left me scratching my head. Imagine how a newcomer would react. I favor "The process of creating money by a simultaneous debit and credit between the participants in the transaction", which is from Bernard Leitaer's book The FUture of Money, glossary, p. 339. Its still kind of terse, and should be followed by illustrative example, to highlight that the credits created become the circulating money, and eventually return to be redeemed.

Is there an "official definition" of mutual credit, and where is it to be found? Blacks Law Dictionary, or the UCC maybe? I'll check.

And, not that it matters, but...exactly how does one improve the enforcement and collection of debts, by "not inlcuding" clauses on it? Ive never heard of ANY contract in the conventional monetary system that says you dont have pay a debt. It sounds counter-intuitive to me. Example? Source? —Preceding unsigned comment added by Solviva (talk • contribs) 07:18, 26 November 2009 (UTC)

Oops, that was a bad verbal slip up. I meant that alternative currencies move away from the enforcement and collection of debts through centralized authority, and move towards individual trust, by not including such clauses. The global economy certainly enforces and collects on debt by including such clauses!

About the member agreement, it's been a while since I read Greco's book (I returned it to the library) so if you have access to it right now I'd go with your interpretation. But I do remember that his notion of a member agreement didn't seem to be describing the same thing as the sort of contracts used by banks for making loans. What Greco was advocating, as I understood it, was an agreement designed to build trust, using the community to enforce it...whereas banks are writing a legal agreement based on an assumption of lack of trust, using the law, courts, credit bureaus, and other systems, rather than the community, to enforce the agreement. Cazort (talk) 18:11, 3 January 2010 (UTC)

Money "creation"?

The article states:

"Mutual credit is a type of alternative currency in which the currency used in a transaction can be created at the time of the transaction."

and:

"...the money supply expands and contracts as needed..."

Well, either I don't understand the notion of money (and monetary "mass"), or all of this is wrong. First, please note the reification of money explicit in terms --but all economic discourse is like that (while economists enjoy joking at laypeople talking of money as a thing.). In mutual credit as in LETS, at transacion time, the value is just noted on a registry. There is no "creation" of money. There is no "expansion" or "contraction". The sum of money is at each instant 0. This manifests by the fact that, on the registry, what is noted on a person's account in + is noted on another person's account in -.

How to explain the system without talking of a pseudo-thing, and without errors? Unless *I* am wrong? -- denis "spir" (talk) 15:11, 27 September 2011 (UTC)

Denis, you're both right and wrong. Whether "money" is "created" or not depends on your concept of what money is (there are numerous differing definitions, subject to opinion), and also on which type of mutual credit system is being used. If to you money is defined as a commodity used as a reference value for other trade items, then no money is created in a LETS system. However if money is defined as a "medium of exchange", or as an "information system for tracking exchanges" then money is created in a LETS system. Also, there are other mutual credit systems other than LETS. In some, instead of using ledgers, actual physical notes are written, which become circulating paper currency. In this case there is little doubt that money is created. The tricky thing about money is that it's very abstract and subjective. Money is whatever people believe it is, and its only worth whatever people believe its worth. People tend to believe that its a fixed, specific thing, but in fact money is more like engineering or art: we can, and do, design all kinds of monies that behave in different ways, and create different effects on society. This entire topic is a tricky one to explain. One of these days, I will pluck up the courage to expand this article in detail, and see if my efforts fly in the Wiki world, or if everything just gets reverted back to what it was. Solviva (talk) 02:55, 8 July 2012 (UTC)